by Guest » Fri Sep 07, 2007 09:20 am
Hi friends, I've heard that Equity indexed universal life insurance can be a very good investment option. I want to purchase a policy that will give me some investment benefits along with life coverage. Shall I consider buying EIUL or something else? Pls. suggest.
Jeremiah
Jeremiah
Posted: Wed Dec 08, 2010 08:02 pm Post Subject:
Max, your being a tad harsh (and I think they like to refer to them as 7702 plans, it sounds cooler).
The comment about 2.5 to 12% rate of return is ridiculous and the in that case our poster is either wildly mis-educated about this product, or quite a terrible liar. I'll give him/her the benefit of the doubt and credit it to not knowing any better.
I wouldn't make it about commissions. Maybe it is, maybe it isn't. But you don't know that for sure (we've run into this a few times and you are unreasonably tough on the whole commission thing it seems).
I am going to take you to task on the idea that no one should be sending money to a life insurance company if they are not lacing out contributions to a qualified retirement plan. 401ks et. al. are not the end all be all savings vehicles, and there is no universally excepted hierarchy for saving in terms of which plans come before others. Sure certain regulatory bullies in the securities industry would have you believe otherwise, but that's just a measure take line their pockets with money.
Posted: Thu Dec 09, 2010 06:26 am Post Subject:
I am going to take you to task on the idea that no one should be sending money to a life insurance company if they are not lacing out contributions to a qualified retirement plan. . . . certain regulatory bullies in the securities industry would have you believe otherwise
You err. FINRA's recently adopted suitability standards/guidelines for variable annuity sales generally require insurance companies to reject most non-qualified annuity applications from individuals who are not funding (especially not fully funding) any other retirement plan asset. It has nothing to do with lining one's pockets with money. It has to do with protecting the public from charlatans looking to separate people from their money. It can also be a conduct violation in variable life insurance sales.
The states are generally applying the same kinds of suitability standards to any annuity transaction with seniors, and to many other annuity transactions. Many insurance companies now have mandatory suitability paperwork that must accompany any annuity transaction, and some are applying to concept to their variable life insurance sales, too. Several companies I have represented required such suitability documentation long before FINRA ever did. It was always about doing the right thing for people, and never about the money.
The simple reason for FINRA's stance is that -- especially with regard to employer-sponsored plans -- it's easier to contribute when the money is taken directly from one's paycheck pretax than from one's checking account after-tax. It has little or nothing to do with the income tax implications of the plan itself.
Obviously, there are some exceptions, such as unexpected cash windfalls (inheritance, lottery, structured settlements, bonuses), but the typical working stiff who doesn't fund any qualified retirement plan probably has no business being involved in a variable annuity.
And any discussion of EIUL that attempts to equate it with or represent it as superior to a qualified plan is just plain wrong (you should see the hand-drawn illustration that WFG reps are TAUGHT to use with clients that does exactly that). It is neither equal to or superior, it is simply DIFFERENT.
Even though I personally believe a Roth IRA is the best IRA going (for those who qualify), I don't tell people to fund their Roth IRA before they buy life insurance. And I don't tell them to buy life insurance before they fund a Roth IRA. The two are entirely different. Each has a different objective and meets a different need.
I wouldn't make it about commissions. Maybe it is, maybe it isn't. But you don't know that for sure (we've run into this a few times and you are unreasonably tough on the whole commission thing it seems).
You're right, I don't know for sure.
But this post is straight out of a WFG marketing script (some of the spelling errors are too!) -- I've heard it countless times (they didn't necessarily originate it, but they are among the most prolific proponents of it).
And at WFG, in many cases, it IS all about the commissions and little to do with what's right for the client. If the WFG rep has a FINRA registration, then the "prescription" will not be EIUL (and its recognized benefits), but will be VUL (which brings none of the guarantees without paying extra for the guarantee riders). Either way, when the "warm market" is exhausted, the rep often departs, too.
So, if the OP never returns to rebut my presumption about his affiliation, then I will assume my challenge was correctly stated.
As an insurance person who, as far back as when I first entered the business in 1980, has only earned my compensation from commissions, I have no reason to be "unreasonably tough on the whole commission thing". Far from it. I think commissions are great -- nothing to prevent me from earning as much as possible! But because of that, for some persons, they can also create a conflict of interest when the pursuit of commissions overrides the mandate to put the best product available (to the agent, when a captive) in the hands of the client at the best price.
Using WFG again, their reps commonly tell others how they represent 30 different insurance companies. The sad truth is that at least 90% (probably higher) of the non-variable life insurance applications taken by all WFG reps are placed with Western Reserve Life -- as an Aegon company, it pays WFG reps a higher commission than the other companies they represent. So what's the point of saying, "We represent 30 of the largest insurance companies in the world" to anyone? I haven't seen them all, but I have not yet seen a single EIUL policy sold by any WFG rep that came from a company other than WRL.
Max, your being a tad harsh
In general . . . ABSOLUTELY! I have a well-defined philosophy of life insurance that dates back 30 years last month. It does not dovetail well with others' whose philosophies focus on "what's right for me" instead of "what's right for the client." Am I wrong because of that? I don't believe so.
I wholeheartedly agree with the concept that if you do the right thing enough times and for enough people, as a professional sales person, you'll get whatever it is you really want for yourself (doesn't have anything to do specifically with insurance, it applies to all sales). Others with a lesser attitude are usually only looking at "how much can I make today (or, in this one sale)?"
I'm sure you'll agree, those persons don't last long here. Or in any other kind of sales organization, either.
But they manage to stay in sales. Insurance, cars, mobile homes, RVs, solar panels, swimming pools, aluminum siding, time shares, home improvements, telephone book advertising . . . the list of possibilities is endless. Which is why all of us who are in sales get a black eye occasionally due to the unsavory acts of others.
For those looking for a third-party assessment of "7702 plans" try this article: http://moremoney.blogs.money.cnn.com/2008/07/03/lured-into-cloak-and-dagger-investment-pitches/
I think it's a fair assessment.
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